‘Distinguished Budget Award' doesn't quite pencil out

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It only took one high-profile court filing last year to underscore the limits of a budget award regularly received (and often touted) by more than a dozen Orange County cities and public agencies.

San Bernardino won the Distinguished Budget Presentation Award in 2011. Then in court last year, the city filed for municipal bankruptcy.

Turns out the award doesn't measure fiscal stability. Instead, governments pay a national trade group to assess whether all the components of their budgets are in order. The review measures good looks more than substance.

Does the document contain a table of contents? Are all the changes from the previous year clear? Is the number of employees included? Are there any indicators to gauge a program's effectiveness?

The national trade group, the Government Finance Officers Association, says the checklist and review process are meant to help agencies improve transparency practices. The award certifies them as adopting industry standards for financial reporting.

But highlighting that coveted stamp of approval comes with a price tag. In order to receive the award, agencies must pay application fees ranging from $185 to $1,380 and then pass the checklist.

Fees depend on the size of an agency's budget and membership to the association. Big agencies, such as Orange County's main supplier of drinking water, and non-members must pay more.

Financial experts from across the nation volunteer to participate in the trade group's awards program. They review another government's budget and provide feedback. Irvine has received the award 22 times, more than any other Orange County city, and says the process has been valuable.

“We try to improve what we do every year,” Irvine spokesman Craig Reem wrote in an email. “The peer comments help us consider those improvements.”

As an example, Reem said Irvine's budget documents now provides much better financial summaries and three-year comparisons. He said the city adopted that format because of peer suggestions.

Irvine pays $785 each year for two budget reviews by the association and by a statewide trade group called the California Society of Municipal Finance Officers. The statewide award program is similar, but costs less and offers one reviewer instead of three.

In Costa Mesa, finance director Bobby Young said recent feedback from the awards programs has focused on improving performance measures. “Easier said than done,” Young wrote in an email, “but we keep working at it.”

Public agencies that receive the two awards often frame them on office walls or publish them at the beginning of budget documents. Before reading actual dollar figures, readers view the stamps of approval.

The Orange County Fire Authority cited its receipt of the two budget awards to buttress a 2011 proposal for handling emergency services in Costa Mesa. It mentioned them in a section about the Fire Authority's credit ratings and fiscal strength.

“The Distinguished Budget (Presentation) Award is the highest form of recognition bestowed by the GFOA for governmental budgeting,” the Fire Authority wrote.

Faced with increased budget pressures, some Orange County agencies have decided the budget awards are no longer worth the cost. Orange had received the association's award for more than a decade when it pulled the plug two years ago.

“The decision is based on the economic recession that we are going through, limited resources and the limited staff that we have,” finance director Rich Jacobs wrote in an email. “The staff time to comply runs from a few days to two weeks.”

Santa Ana, a longtime recipient of the budget awards, has also stopped applying for them in recent years to save money, spokesman Jose Gonzalez said.

Santa Ana and Orange are the exceptions, though. Most Orange County agencies that won the awards for the 2007 fiscal year were still receiving them in 2012, online records from the two programs show. The number of local award recipients grew from 19 to 22 over the same period, too.

The awards have actually become more popular across governments despite the economic recession. The number of recipients for the California award increased slightly in the past two rounds. The number of national recipients grew by 3 percent to 1,328.

“We've been doing quite well,” said John Fishbein, who oversees the day-to-day operations of the association's award. “Even with the economy we've been growing.”

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